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E-commerce inquiry may affect the fashion sector

The Emperor's new clothes may undergo some changes as the fashion sector is currently under the magnifying glass of numerous competition authorities throughout Europe.

United Kingdom

On March 24, 2015 the Competition and Markets Authority ("CMA") has opened an investigation into suspected anti-competitive arrangements in the UK clothing, footwear and fashion sector, which may infringe UK and/or EU competition law on anti-competitive agreements.

According to the limited information publicly available, the CMA is expected to decide in October 2015 whether to proceed with the investigation or to close it, following an initial investigation including information gathering through formal or informal requests for information.

Italy

On March 26, 2015, only two days after the CMA's opening of its fashion investigation, the Italian Competition Authority ("ICA") officially opened an investigation into the main fashion agencies active in Italy as well as into a trade association, alleging anti-competitive information exchanges and the coordination of contractual and membership conditions. The expected deadline for the conclusion of the investigation is October 31, 2016.

European Union

On March 26, 2015 and on April 9, 2015 the European Commissioner in charge of competition policy, Margrethe Vestager, confirmed its intention to launch a competition inquiry in the e-commerce sector in May, as an important tool in the completion of the Digital Single Market. "Last year, 50% of European consumers engaged in online shopping, but only 15% from across a border" the European Commissioner stated on April 9, 2015. Thus, the sector inquiry will focus, inter alia, on the question whether companies unduly restrict online sales. Commissioner Vestager stressed: “The envisaged sector inquiry will help the Commission to understand and tackle barriers to e-commerce to the benefit of European citizens and business.

While a sector inquiry does not target any individual company, the information gathered is frequently used to initiate infringement proceedings against individual targets at a later stage. Where the Commission identifies specific competition concerns, it will likely open investigations against individual companies, which could result in significant fines.

What to do?

First, companies that receive questionnaires from the European Commission should seek expert advice from competition lawyers before they respond. While many questions will be factual and descriptive, others are more open-ended and strategic. You do not want to punch a hole in your new coat.

Second, fashion companies should use the opportunity to take a fresh look at their online sales policies and ensure that they are fully compliant with the EU competition rules.

Third, fashion companies may wish to revisit all of their distribution agreements and audit their distribution practices to ensure that there are no skeleton in the closet, verifying their compliance with competition law before any formal investigation is opened.

Prior to the start of a sector inquiry, it is recommended that companies ensure that they are fully up to date with their competition compliance, also taking into account the latest developments of EU case law.

Finally, any companies that have not yet adopted a comprehensive antitrust compliance program, should now jump on the band wagon - it is high noon.

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